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The Law of Contract Act, Cap. 345 R.E 2002 PDF
The Law of Contract Act, Cap. 345 R.E 2002 PDF
CHAPTER 345
______
THE LAW OF CONTRACT ACT
[PRINCIPAL LEGISLATION]
ARRANGEMENT OF SECTIONS
Section
Title
PART I
PRELIMINARY PROVISIONS
1.
2.
Short title.
Construction.
PART II
COMMUNICATION, ACCEPTANCE AND
REVOCATION OF PROPOSALS
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
26.
27.
28.
29.
30.
31.
32.
33.
34.
35.
36.
37.
38.
39.
40.
41.
42.
43.
44.
45.
46.
47.
48.
49.
50.
51.
57.
58.
59.
60.
61.
Appropriation of Payment
Application of payment where debt to be discharged is indicated.
Application of payment where debt to be discharged is not indicated.
Application of payment where neither party appropriates.
52.
53.
54.
55.
56.
PART VI
CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
68.
69.
70.
71.
72.
PART VII
CONSEQUENCES OF BREACH OF CONTRACT
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
91.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
105.
106.
107.
108.
109.
110.
111.
112.
113.
114.
115.
116.
117.
118.
119.
120.
121.
122.
123.
124.
125.
126.
127.
128.
129.
130.
131.
132.
133.
PART X
AGENCY
Appointment and Authority of Agents
134.
135.
136.
137.
138.
139.
140.
141.
142.
143.
144.
145.
146.
147.
148.
149.
150.
151.
152.
Right of person as to acts done for him without his authority and effect of
ratification.
Ratification may be express or implied.
Knowledge requisite for valid ratification.
Effect of ratifying unauthorised act forming part of a transaction.
Ratification of unauthorised act cannot injure third person.
Revocation of Agency
153.
154.
155.
156.
157.
158.
159.
160.
161.
Termination of agency.
Termination of agency, where agent has an interest in subject-matter.
When principal may revoke agent's authority.
Revocation where authority has been partly exercised.
Compensation for revocation by principal or renunciation by agent.
Notice of revocation or renunciation.
Revocation and renunciation may be express or implied.
When termination of agent's authority takes effect as to agent, and as to
third persons.
Agent's duty on termination of agency by principal's death or insanity.
162.
163.
164.
165.
166.
167.
168.
169.
170.
171.
172.
173.
174.
175.
176.
177.
178.
179.
180.
181.
182.
183.
184.
185.
186.
187.
188.
189.
PART XI
PARTNERSHIP
Nature of Partnership
190.
191.
192.
193.
194.
195.
196.
197.
198.
199.
200.
201.
202.
203.
204.
205.
206.
207.
208.
209.
210.
211.
212.
213.
214.
215.
216.
217.
218.
219.
220.
221.
222.
223.
224.
225.
226.
227.
228.
______
CHAPTER 345
_______
THE LAW OF CONTRACT ACT
An Act to provide for the law relating to contracts.
[3rd March, 1961]
Ord. No. 1 of 1961
[R.L. Cap. 433]
Act No. 55 of 1963
PART I
PRELIMINARY PROVISIONS
Short title
10
(j)
Communication, when
complete
Revocation of
proposals and
acceptances
11
not afterwards.
Revocation, how made
Acceptance must be
absolute
6. A proposal is revoked
(a) by the communication of notice of revocation by the
proposer to the other party;
(b) by the lapse of the time prescribed in such proposal for its
acceptance, or, if no time is so prescribed, by the lapse of a
reasonable time, without communication of the acceptance;
(c) by the failure of the acceptor to fulfil a condition precedent
to acceptance; or
(d) by the death or insanity of the proposer, if the fact of his
death or insanity comes to the knowledge of the acceptor
before acceptance.
7. In order to convert a proposal into a promise, the acceptance
must
(a) be absolute and unqualified;
(b) be expressed in some usual and reasonable manner, unless
the proposal prescribes the manner in which it is to be
accepted; and if the proposal prescribes a manner in which it
is to be accepted, and the acceptance is not made in such
manner, the proposer may, within a reasonable time after the
acceptance is communicated to him, insist that his proposal
shall be accepted in the prescribed manner, and not
otherwise, but if he fails to do so he accepts the acceptance.
Acceptance by
performing conditions,
or receiving
consideration
What
agreements are
contracts
10. All agreements are contracts if they are made by the free consent of
parties competent to contract, for a lawful consideration and with a lawful
object, and are not hereby expressly declared to be void:
Provided that nothing herein contained shall affect any law in force,
and not hereby expressly repealed or disapplied, by which any contract is
required to be made in writing or in the presence of witnesses, or any law
relating to the registration of documents.
12
Persons
competent to
contract
What is a sound
mind for the
purposes of
contracting
"Consent"
defined
13. Two or more persons are said to consent when they agree upon the
same thing in the same sense.
"Free consent"
defined
(2) Consent is said to be not free when it would not have been given but
for the existence of such coercion, undue influence, fraud, misrepresentation or
mistake.
"Coercion"
defined
Cap.16
Cap.16
"Undue
influence"
defined
13
Cap.6
"Fraud" defined
"Misrepresentation" defined
Effect of
agreements
induced by
coercion, fraud,
misrepresentation or
undue influence
14
Effect of
mistakes as to
law
Unilateral
mistake
What
considerations
and objects are
lawful and what
are not
15
undue influence; or
(c) the agreement is declared to be illegal by any written law with the
object of protecting a particular class of persons of which the
plaintiff is one.
Agreements
void if
considerations
and objects are
unlawful in part
24. If any part of a single consideration for one or more objects, or any
one or any part of any one of several considerations for a single object, is
unlawful, the agreement is void.
Agreement
without
consideration is
void, unless it is
in writing and
registered; or is
a promise to
compensate for
something done;
or is a promise
to pay a debt
barred by
limitation of law
Agreement in
restraint of
marriage void
Agreement in
restraint of trade
void
16
Agreement void
for uncertainty
Agreement by
way of wager
void
"Contingent
contract"
defined
Enforcement of
contract
contingent on an
event happening
Enforcement of
contract
contingent on an
event not
happening
When event on
which contract
is contingent to
be deemed
17
impossible, if it
is the future
conduct of a
living person
impossible that he should so act within any definite time, or otherwise than
under further contingencies.
A contingent
contract
Agreement
contingent on
impossible
events void
Obligations of
parties to
contracts
Effect of refusal
to accept offer
of performance
18
Effect of refusal
of party to
perform promise
wholly
Persons by
whom promise
is to be
performed
40. If it appears from the nature of the case that it was the intention of
the parties to any contract that any promise contained in it should be performed
by the promisor himself, such promise must be performed by the promissory;
and in other cases the promisor or his representatives may employ a competent
person to perform it.
Effect of
accepting
performance
from third
person
42. When two or more persons have made a joint promise, then, unless
a contrary intention appears by the contract, all such persons, during their joint
lives, and after the death of any of them, his representative jointly with the
survivor or survivors, and after the death of the last survivor, the
representatives of all jointly, must fulfil the promise.
Obligations and
liabilities of
joint promisors
43.-(1) When two or more persons make a joint promise, the promisee
may, in the absence of express agreement to the contrary, compel any one or
more of such joint promisors to perform the whole of the promise:
Provided that where a promisee institutes a suit against any one or more
of such joint promisors and obtains a decree therein, nothing in this subsection
shall be construed as permitting the promisee to institute any further suit
arising out of the same cause of action against any other of such joint
promisors.
(2) Each of two or more joint promisors may compel every other joint
promisor to contribute equally with himself to the performance of the promise,
unless a contrary intention appears from the contract.
(3) If any one of two or more joint promisors makes default in such
contribution, the remaining joint promisors must bear the loss arising from
such default in equal shares.
(4) Nothing in this section shall prevent a surety from recovering from
his principal payments made by the surety on behalf of the principal, or entitle
the principal to recover anything from the surety on account of payments made
by the principal.
Effect of release
of one joint
promisor
44. Where two or more persons have made a joint promise, a release of
one of such joint promisors by the promisee does not discharge the other joint
promisor or joint promisors; neither does it free the joint promisor so released
from responsibility to the other joint promisor or joint promisors.
19
Devolution of
joint rights
45. When a person has made a promise to two or more persons jointly,
then, unless a contrary intention appears from the contract, the right to claim
performance rests, as between him and them, with them during their joint lives,
and, after the death of any of them, with the representative of such deceased
person jointly with the survivor or survivors, and, after the death of the last
survivor, with the representatives of all jointly.
Time and Place for Performance
Time for
performance of
promise where
no application is
to be made and
no time is
specified
Application for
performance on
certain day to be
at proper time
and place
Place for
performance of
promise where
no application to
be made and no
place fixed for
performance
Performance in
manner or at
time prescribed
or sanctioned by
promisee
20
and willing to
perform
Order of
performance of
reciprocal
promises
Liability of
party preventing
event on which
contract is to
take effect
53. When a contract contains reciprocal promises, and one party to the
contract prevents the other from performing his promises, the contract becomes
voidable at the option of the party so prevented; and he is entitled to
compensation from the other party for any loss which he may sustain in
consequence of the non-performance of the contract.
Effect of default
as to that
promise which
should be first
performed, in
contract
consisting of
reciprocal
promises
Effect of failure
to perform at
fixed time in
contract
Agreement to do
impossible act,
subsequent
impossibility or
unlawfulness
and related
compensation
Alternative
promise, one
branch being
illegal
Appropriation of Payments
Application of
payment where
debt to be
discharged is
indicated
59. Where a debtor, owing several distinct debts to one person, makes
a payment to him, either with express intimation, or under circumstances
implying that the payment is to be applied to the discharge of some particular
debt, the payment, if accepted, must be applied accordingly.
Application of
payment where
debt to be
discharged is not
indicated
60. Where the debtor has omitted to intimate and there are no other
circumstances indicating to which debt the payment is to be applied, the
creditor may apply it at his discretion to any lawful debt actually due and
payable to him from the debtor, whether its recovery is or is not barred by the
law in force for the time being as to the limitation of suits.
Application of
payment where
neither party
appropriates
61. Where neither party makes any appropriation, the payment shall be
applied in discharge of the debts in order of time, whether they are or are not
barred by the law in force for the time being as to the limitation of suits; and if
the debts are of equal standing, the payment shall be applied in discharge of
each proportionably.
Contracts Which Need Not Be Performed
Effect of
novation,
rescission and
alteration of
contract
62. If the parties to a contract agree to substitute a new contract for it,
or to rescind or alter it, the original contract need not be performed.
Promisee may
dispense with or
remit
performance of
promise
63. Every promisee may dispense with or remit, wholly or in part, the
performance of the promise made to him, or may extend the time for such
performance, or may accept instead of it any satisfaction which he thinks fit.
Consequences
of rescission of
voidable
contract
22
received any benefit thereunder from another party to such contract, restore
such benefit, so far as may be, to the person from whom it was received.
Obligation of
person who has
received
advantage under
void or contract
that becomes
void
Mode of
communicating
or revoking
rescission of
voidable
contract
Effect of neglect
of promisee
PART VI
CERTAIN RELATIONS RESEMBLING THOSE CREATED BY CONTRACT
Claim for
necessaries
supplied to
person incapable
of contracting,
or on his
account
Reimbursement
of person paying
money due by
another in
payment of
which he is
interested
23
Obligation of
person enjoying
benefit of nongratuitous act
Responsibility
of finder of
goods
71. A person who finds goods belonging to another, and takes them
into his custody, is subject to the same responsibility as a bailee.
Liability of
person to whom
money is paid or
thing delivered
by mistake or
under coercion
72.
A person to whom money has been paid, or anything delivered,
by mistake as to a matter of fact which, if true, would give rise to a legal
obligation or under coercion, must repay or return it.
PART VII
CONSEQUENCES OF BREACH OF CONTRACT
Compensation
for loss or
damage caused
by breach of
contract, etc.
73.-(1) When a contract has been broken, the party who suffers by such
breach is entitled to receive, from the party who has broken the contract,
compensation for any loss or damage caused to him thereby, which naturally
arose in the usual course of things from such breach, or which the parties
knew, when they made the contract, to be likely to result from the breach of it.
(2) The compensation is not to be given for any remote and indirect
loss or damage sustained by reason of the breach.
(3) When an obligation resembling those created by contract has been
incurred and has not been discharged, any person injured by the failure to
discharge is entitled to receive the same compensation from the party in default
as if such person had contracted to discharge it and had broken his contract.
(4) In estimating the loss or damage arising from a breach of contract,
the means which existed of remedying the inconvenience caused by the nonperformance of the contract must be taken into account.
Compensation
for breach of
contract where
penalty
stipulated
duty or act in which the public are interested, he shall be liable, upon breach of
the condition of any such instrument, to pay the whole sum mentioned therein.
(4) For the avoidance of doubt, it is hereby declared that a person who
enters into a contract with the Government or the President does not
necessarily thereby undertake any public duty, or promise to do an act in which
the public are interested.
Party rightfully
rescinding
contract entitled
to compensation
75.
A person who rightly rescinds a contract is entitled to
compensation for any damage which he has sustained through the nonfulfilment of the contract.
PART VIII
INDEMNITY AND GUARANTEE
"Contract of
indemnity"
defined
76. A contract by which one party promises to save the other from loss
caused to him is called a "contract of indemnity".
Rights of
indemnityholder when
sued, etc.
"Contract of
guarantee",
"surety",
"principal
debtor", and
"creditor"
defined
Consideration
for guarantee
79. Anything done, or any promise made, for the benefit of the
principal debtor may be a sufficient consideration to the surety for giving the
guarantee.
25
Surety's liability
80. The liability of the surety is co-extensive with that of the principal
debtor, unless it is otherwise provided by the contract.
"Continuing
guarantee"
defined
Revocation of
continuing
guarantee
Revocation of
continuing
guarantee by
surety's death
83.
The death of the surety operates, in the absence of any contract
to the contrary, as a revocation of a continuing guarantee, so far as regards
future transactions.
Liability of two
persons,
primarily liable,
not affected by
arrangements
between them
that one shall be
surety on
another's default
Discharge of
surety by
variance in
terms of contract
85. Any variance, made without the surety's consent in the terms of the
contract between the principal debtor and the creditor, discharges the surety as
to transactions subsequent to the variance.
Discharge of
surety by release
or discharge of
principal debtor
86. The surety is discharged by any contract between the creditor and
the principal debtor, by which the principal debtor is released, or by any act or
omission of the creditor, the legal consequence of which is the discharge of the
principal debtor.
Discharge of
surety when
creditor
compounds
with, gives time
to, or agrees not
to sue, principal
debtor
87. A contract between the creditor and the principal debtor, by which
the creditor makes a composition with, or promises to give time to, or not to
sue, the principal debtor, discharges the surety, unless the surety assents to
such contract.
Surety not
discharged when
agreement made
with third
person to give
time to principal
debtor
88. Where a contract to give time to the principal debtor is made by the
creditor with a third person, and not with the principal debtor, the surety is not
discharged.
26
Creditor's
forbearance to
sue does not
discharge surety
89. Mere forbearance on the part of the creditor to sue the principal
debtor or to enforce any other remedy against him does not, in the absence of
any provision in the guarantee to the contrary, discharge the surety.
Release of one
co-surety does
not discharge
others
Discharge of
surety by
creditor's act or
omission
impairing
surety's eventual
remedy
91. If the creditor does any act which is inconsistent with the rights of
the surety, or omits to do any act which his duty to the surety requires him to
do, and the eventual remedy of the surety himself against the principal debtor
is thereby impaired, the surety is discharged.
Rights of surety
on payment or
performance
Surety's right to
benefit of
creditor's
securities
Guarantee
obtained by
misrepresentatio
n invalid
Guarantee
obtained by
concealment
invalid
Guarantee on
contract that
creditor shall not
act on it until
co-surety joins
Implied promise
to indemnify
surety
27
Co-sureties
liable to
contribute
equally
98. Where two or more persons are co-sureties for the same debt or
duty, either jointly or severally, and whether under the same or different
contracts, and whether with or without the knowledge of each other, the cosureties, in the absence of any contract to the contrary, are liable, as between
themselves, to pay each an equal share of the whole debt, or of that part of it
which remains unpaid by the principal debtor.
99. Co-sureties who are bound in different sums are liable to pay
equally as far as the limits of their respective obligations permit.
PART IX
BAILMENT
"Bailment",
"bailor" and
"bailee" defined
Delivery to
bailee, how
made
101. The delivery to the bailee may be made by doing anything which
has the effect of putting the goods in the possession of the intended bailee or of
any person authorised to hold them on his behalf.
Bailor's duty to
disclose faults in
goods bailed
102.-(1) The bailor is bound to disclose to the bailee faults in the goods
bailed, of which the bailor is aware, and which materially interfere with the use
of them, or expose the bailee to extraordinary risks; and, if he does not make
such disclosure, he is responsible for damage arising to the bailee directly from
such faults.
(2) If the goods are bailed for hire, the bailor is responsible for such damage,
whether he was or was not aware of the existence of such faults in the goods
bailed.
Care to be taken
by bailee
103. In all cases of bailment the bailee is bound to take as much care of
the goods bailed to him as a person of ordinary prudence would, under similar
circumstances, take of his own goods of the same bulk, quality and value as the
goods bailed:
Provided that nothing in this section shall be construed as applying to
or qualifying the liability at common law of a common carrier or an inn keeper.
28
Termination of
bailment by
bailee's act
inconsistent
with conditions
Liability of
bailee making
unauthorised use
of goods bailed
106. If the bailee makes any use of the goods bailed, which is not
according to the conditions of the bailment, he is liable to make compensation
to the bailor for any damage arising to the goods from or during such use of
them.
Effect of
mixture, with
bailor's consent,
of his goods
with bailee's
107. If the bailee, with the consent of the bailor, mixes the goods of the
bailor with his own goods, the bailor and the bailee shall have an interest in
proportion to their respective with shares, in the mixture thus produced.
Effect of
mixture, without
bailor's consent,
when the goods
can be separated
108. If the bailee, without the consent of the bailor, mixes the goods of
the bailor with his own goods, and the goods can be separated or divided, the
property in the goods remains in the parties respectively; but the bailee is
bound to bear the expense of separation or division, and any damage arising
from the mixture.
Effect of
mixture, without
bailor's consent,
when cannot be
separated
109. If the bailee, without the consent of the bailor, mixes the goods of
the bailor with his own goods, in such a manner that it is impossible to separate
the goods bailed from other goods and deliver them back, the bailor is entitled
to be compensated by the bailee for the loss of the goods.
Repayment by
bailor of
necessary
expenses
110. Where, by the conditions of the bailment, the goods are to be kept
or to be carried, or to have work done upon them by the bailee for the bailor,
and the bailee is to receive no remuneration, the bailor shall repay to the bailee
the necessary expenses incurred by him for the purpose of the bailment.
Restoration of
goods lent
gratuitously
111. The lender of a thing for use may at any time require its return, if
the loan was gratuitous, even though he lent it for a specified time or purpose;
but, if, on the face of such loan made for a specified time or purpose, the
borrower has acted in such a manner that the return of the thing lent before the
time agreed upon would cause him loss exceeding the benefit actually derived
by him from the loan, the lender must, if he compels the return, indemnify the
borrower for the amount in which the loss so occasioned exceeds the benefit so
derived.
Return of goods
bailed, on
expiration of
time or
accomplishment
of purpose
29
Bailee's
responsibility
when goods are
not duly
returned
113. If, by the default of the bailee, the goods are not returned,
delivered or tendered at the proper time, he is responsible to the bailor for any
loss, destruction or deterioration of the goods from that time.
Termination of
gratuitous
bailment by
death
Bailor entitled to
increase or
profit from
goods bailed
Bailor's
responsibility to
bailee
116. The bailor is responsible to the bailee for any loss which the bailee
may sustain by reason that the bailor was not entitled to make the bailment, or
to receive back the goods, or to give directions respecting them.
Bailment by
several joint
owners
117. If several joint owners of goods bail them, the bailee may
deliver them back to, or according to the directions of, one joint owner without
the consent of all, in the absence of any agreement to the contrary.
Bailee not
responsible on
redelivery to
bailor without
title
118. If the bailor has no title to the goods and the bailee, in good faith,
delivers them back to, or according to the directions of, the bailor, the bailee is
not responsible to the owner in respect of such delivery.
Right of third
person claiming
goods bailed
119. If a person, other than a bailor, claims goods bailed he may apply
to the court to stop the delivery of the goods to the bailor, and to decide the
title to the goods.
Right of finder
of goods
120. The finder of goods has no right to sue the owner for
compensation for trouble and expense voluntarily incurred by him to preserve
the goods and to find out the owner; but he may retain the goods against the
owner until he receives such compensation; and, where the owner has offered a
specific reward for the return of goods lost, the finder may sue for such reward,
and may retain the goods until he receives it.
When finder of
thing commonly
on sale may sell
it
30
Bailee's
particular lien
122. Where the bailee has, in accordance with the purpose of the
bailment, rendered any service involving the exercise of labour or skill in
respect of the goods bailed, he has, in the absence of a contract to the contrary,
a right to retain such goods until he receives due remuneration for the services
he has rendered in respect of them.
General lien of
bankers, factors,
wharfingers,
advocates,
policy-brokers
"Pledge",
"pawnor", and
"pawnee"
defined
Pawnee's right
of retainer
125. The pawnee may retain the goods pledged, not only for payment
of the debt or the performance of the promise, but for the interest of the debt,
and all necessary expenses incurred by him in respect of the possession or for
the preservation of the goods pledged.
Pawnee not to
retain for debt or
promise other
than that for
which goods
pledged
126. The pawnee shall not, in the absence of a contract to that effect,
retain the goods pledged for any debt or promise other than the debt or promise
for which they are pledged; but such contract, in the absence of anything to the
contrary, shall be presumed in regard to subsequent advances made by the
pawnee.
Presumption in Case of Subsequent Advances
Pawnee's right
as to
extraordinary
expenses
incurred
Pawnee's right
where pawnor
makes default
31
Defaulting
pawnor's right to
redeem
Pledges by
mercantile
agents and
persons in
possession
under voidable
contracts
Cap.214
130.-(1) Where a mercantile agent is, with the consent of the owner, in
possession of goods or the documents of title to goods, any pledge made by
him, when acting in the ordinary course of business of a mercantile agent, shall
be as valid as if he were expressly authorised by the owner of the goods to
make the same; provided that the pawnee acts in good faith and has not at the
time of the pledge notice that the pawnor has no authority to pledge.
(2) Where a mercantile agent validly pledges the documents of title to
goods, the pledge shall be deemed to be a pledge of the goods.
(3) Where a pawnor has obtained possession of the goods pledged by
him under a contract voidable under section 19, but the contract has not been
rescinded at the time of the pledge, the pawnee acquires a good title to the
goods; provided he acts in good faith and without notice of the pawnor's defect
of title.
(4) In this section the expressions "mercantile agent" and "documents
of title to goods" shall have the meanings ascribed to them respectively in the
Sale of Goods Act.
Pledge where
pawnor has only
a limited interest
Apportionment
of relief or
compensation
obtained by such
suits
32
PART X
AGENCY
Appointment and Authority of Agents
"Agent" and
"principal"
defined
Who may
employ agent
135. Any person who is of the age of majority according to the law
to which he is subject, and who is of sound mind, may employ an agent.
Who may be an
agent
136. As between the principal and third persons any person may
become an agent; but no person who is not of the age of majority and of sound
mind can become an agent, so as to be responsible to his principal according to
the provisions of this Act.
Consideration
not necessary
Agent's
authority may be
express or
implied
Definitions of
express and
implied
authority
Extent of agent's
authority
Agent's
authority in an
emergency
When agent
cannot delegate
33
"Sub-agent"
defined
Representation
of principal by
sub-agent
properly
appointed
Agent's
responsibility
for sub-agent
appointed
without
authority
Relation
between
principal and
person
appointed by
agent to act in
business of
agency
Agent's duty in
naming such
person
Right of person
as to acts done
for him without
his authority and
effect of
ratification
148. Where acts are done by one person on behalf of another, but
without his knowledge or authority, he may elect to ratify or to disown such
acts and if he ratifies them, the same effects will follow as if they had been
performed by his authority.
Ratification may
be express or
implied
Knowledge
requisite for
valid ratification
34
Effect of
ratifying
unauthorised act
forming part of
a transaction
151. A person ratifying any unauthorised act done on his behalf ratifies
the whole of the transaction of which such act formed a part.
Ratification of
unauthorised act
cannot injure
third person
Termination of
agency
Termination of
agency, where
agent has an
interest in
subject-matter
154. Where the agent has himself an interest in the property which
forms the subject-matter of the agency, the agency cannot, in the absence of an
express contract, be terminated to the prejudice of such interest.
When principal
may revoke
agent's authority
Revocation
where authority
has been partly
exercised
156. The principal cannot revoke the authority given to his agent after
the authority has been partly exercised, so far as regards such acts and
obligations as arise from acts already done in the agency.
Compensation
for revocation
by principal or
renunciation by
agent
Notice of
revocation or
renunciation
Revocation and
renunciation
may be express
or implied
When
termination of
agent's authority
takes effect as to
agent, and as to
third persons
Agent's duty on
termination of
agency by
principal's death
or insanity
Termination of
sub-agent's
authority
Agent's duty in
conducting
principal's
business
Skill and
diligence
required from
agent
Agent's accounts
165.
demand.
Agent's duty to
communicate
with principal
Right of
principal when
agent deals, on
his own account,
in business of
the agency
without
principal's
consent
36
Principal's right
to benefit gained
by agent dealing
on his own
account in
business of
agency
Agent's right of
retainer out of
sums received
on principal's
account
169. An agent may retain, out of any sums received on account of the
principal in the business of the agency, all moneys due to himself in respect of
advances made or expenses properly incurred by him in conducting such
business, and also such remuneration as may be payable to him for acting as
agent.
Agent's duty to
pay sums
received for
principal
When agent's
remuneration
becomes due
Agent not
entitled to
remuneration for
business
misconducted
Agent's lien on
principal's
property
Agent to be
indemnified
against
consequences of
lawful acts
Agent to be
indemnified
against
consequences of
acts done in
good faith
175. Where one person employs another to do an act and the agent
does the act in good faith, the employer is liable to indemnify the agent against
the consequences of that act, though it causes an injury to the rights of third
persons.
37
Non-liability of
employer of
agent to do a
criminal act
Compensation
to agent for
injury caused by
principal's
neglect
177. The principal must make compensation to his agent in respect of injury
caused to such agent by the want of skill.
Principal how
far bound when
agent exceeds
authority
179. When an agent does more than he is authorised to do, and when
the part of what he does, which is within his authority, can be separated from
the part which is beyond his authority, so much only of what he does as is
within his authority is binding as between him and his principal.
Principal not
bound when
excess of agent's
authority is not
separable
180. Where an agent does more than he is authorised to do, and what
he does beyond the scope of his authority cannot be separated from what is
within it, the principal is not bound to recognise the transaction.
Consequences
of notice given
to agent
Agent cannot
personally
enforce, nor be
bound by,
contracts on
behalf of
principal
Rights of parties
to a contract
made by agent
not disclosed
Consequence of
inducing agent
or principal
185. When a person who has made a contract with an agent induces
the agent to act upon the belief that the principal only will be held liable, or
induces the principal to act upon the belief that the agent only will be held that
liable, he cannot afterwards hold liable the agent or principal respectively.
Liability of
pretended agent
Person falsely
contracting as
agent not
entitled to
performance
187. A person with whom a contract has been entered into in the
character of agent is not entitled to require the performance of it if he was in
reality acting, not as agent, but on his own account.
Liability of
principal
inducing belief
that agent's
unauthorised
acts were
authorised
Effect, on
agreement, of
misrepresentatio
n or fraud by
agent
"Partnership"
and "firm"
defined
39
collectively a "firm", and the name under which their business is carried on is
called the "firm name".
Rules for
determining
existence of
partnership
General duties
of partners
192. Partners are bound to carry on the business of the partnership for
the greatest common advantage, to be just and faithful to each other, and to
render true accounts and full information of all things affecting the partnership
to any partner or his legal representatives.
Variation by
consent of terms
of partnership
Conduct of
business and
mutual rights
194. In the absence of any contract to the contrary, the rights and
duties of the partners in relation to the partnership shall be determined by the
40
and liabilities
following rules
(a) every partner has a right to take part in the management of the
partnership business;
(b) any differences arising as to ordinary matters connected with the
partnership business may be decided by a majority of all the
partners, but no change may be made in the nature of the
partnership business without the consent of all existing partners;
(c) every partner has a right to have access to and to inspect and copy
any of the books of the firm;
(d) a partner is not entitled to receive remuneration for taking part in
the conduct of the business;
(e) all partners are entitled to share equally in the capital and profits
of the business, and must contribute equally towards the losses,
whether of capital or otherwise, sustained by the firm;
(f) the firm must indemnify every partner in respect of payments
made and personal liabilities incurred by him
(i)
in the ordinary and proper course of the business of the
firm; and
(ii)
in or about anything necessarily done for the
preservation of the business or property of the firm;
(g) a partner shall indemnify the firm for any loss caused to it by his
fraud or wilful neglect in the conduct of the business of the firm.
Partnership
property
Accountability
of partners for
private profits
and competing
businesses
41
partners, he shall account for and pay to the firm all profits made
by him in that business.
When a term for
partnership
expires
Introduction of
new partners
Expulsion
199. A partner may not be expelled from a firm by his partners unless
a power to that effect has been expressly conferred by agreement between the
partners.
Retirement
200. Where no fixed term has been agreed upon for the duration of the
partnership, any partner may determine the partnership at any time on giving
notice of his intention so to do to all the other partners.
Relations of Partners to Persons dealing with them
Power of partner
to bind the firm
201.-(1) Every partner is an agent of the firm and his other partners for
the purpose of the business of the partnership; and the acts of every partner
who does any act for carrying on in the usual way of business of the kind
carried on by the firm bind the firm and his partners, unless the partner so
acting has in fact no authority to act for the firm in the particular matter, and
the person with whom he is dealing either knows that he has no authority or
does not know or believe him to be a partner.
(2) In the absence of any usage or custom of trade or express authority
to act for the firm, a partner is not an agent of the firm or his other partners to
(a) submit a dispute relating to the business of the firm to arbitration;
(b) open a banking account on behalf of the firm in his own name;
(c) compromise or relinquish any claim or portion of a claim by the
firm;
(d) withdraw a suit or proceeding filed on behalf of the firm;
(e) admit any liability in a suit or proceeding against the firm:
(f) acquire immovable property on behalf of the firm;
(g) transfer property belonging to the firm; or
(h) enter into partnership on behalf of the firm.
Partners bound
by acts on
behalf of firm
42
Provided that nothing in this section shall affect any general rule of law
relating to the execution of deeds or negotiable instruments.
Liability of
partners for
debts
203. Every partner is liable for all debts and obligations incurred
while he is a partner in the usual course of business by or on behalf of the
partnership.
Liability for
wrongs and
misapplication
Improper
employment of
trust property
for partnership
purposes
Persons liable
by holding out
Notice to partner
to be notice to
firm
43
Liabilities of
incoming and
outgoing
partners
Revocation of
continuing
guarantee by
change in firm
Rights of
assignee of
share in
partnership
Minors not
competent to be
partners
Dissolution by
expiration or
notice
44
notice as the date of dissolution, or, if no date is so mentioned, as from the date
of the communication of the notice.
Dissolution by
death,
bankruptcy or
charge
Cap.33
Dissolution by
illegality of
partnership
Dissolution by
court
Rights of
persons against
apparent
members of the
firm
45
Partners' right to
notice of
dissolution
Continuance of
rights and
liabilities of
partners after
dissolution
Rights of
partners as to
application of
partnership
property
Apportionment
of premium
where
partnership
prematurely
dissolved
Rights where
partnership
dissolved for
fraud or
misrepresentation
46
Retiring or
deceased
partner's share to
be a debt
223. Subject to any agreement between the partners, the amount due
from surviving or continuing partners to an outgoing partner or the
representatives of a deceased partner in respect of the outgoing or deceased
partner's share is a debt accruing at the date of the dissolution or death.
Rule for
distribution of
assets on final
settlement of
accounts
Payment of firm
debts and of
separate debts
225. Where there are joint debts due from the firm, and also separate
debts due from any partner, the property of the firm shall be applied in the first
47
instance in payment of the debts of the firm, and if there is any surplus, then
the share of each partner shall be applied in payment of his separate debts or
paid to him; the separate property of any partner shall be applied first in the
payment of his separate debts, and the surplus (if any) in the payment of the
debts of the firm.
Incorporated
partnerships and
joint-stock
companies
Disapplication
of the Indian
Contract Act
and amendment
of R.L. Cap. 2
Transitional
provisions
228.
[Transitional provisions.]
48